Silvercrest Asset Management Group Inc.

Good morning and welcome to the Silver Crest Asset Management Group Q2 2026 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Before we begin, Before we begin, let me remind you that during today's call, certain statements made regarding our future performance are forward-looking statements. They are based on current expectations and projections, which are subject to a number of risks and uncertainties, and many factors could cause actual results to differ materially from the statements that are made. Those factors are disclosed in our filings with the SEC under the caption, Risk Factors. For all such forward-looking statements, we claim the protections provided by the Litigation Reform Act of 1995. All forward-looking statements made on this call are made as of the date hereof, and Silvercrest assumes no obligation to update them. I would now like to turn the conference over to Rick Hough, Chairman and CEO of Silvercrest. Please go ahead.

Good morning and thanks for joining us for the second quarter of 2026 earnings call. Silvercrest made strategic progress during the second quarter and the plan we described over the past two years is proceeding as we designed. Discretionary assets under management, which primarily drives the firm's revenue, increased 6.9% during the second quarter to $24.7 billion at June 30, 2026 and from $23.1 billion at March 31, 2026. driven by market appreciation partially offset by net client outflows. Outflows during the quarter were primarily attributable to seasonal high net worth client withdrawals or tax payments consistent with prior second quarters as well as institutional outflows. Over 200 million of those outflows will have no revenue effect at the firm. Year over year, discretionary AUM grew 4.2% from 23.7 billion. Total AUM increased 3.6% during the quarter to $37.0 billion. Organic new client account flows were $111 million for the second quarter, up from $81 million in the first quarter and $80 million in the prior year period. As discussed in prior quarters, Non-discretionary AUM are associated with a small portion of revenue. We will adjust how the firm reports non-discretionary AUM next quarter, likely eliminating the non-discretionary category. The adjustment will substantially lower reported non-discretionary and total AUM on a one-time basis without any revenue effect. We seek to provide investors with a clearer picture of the discretionary AUM and economics that drive our business. While revenue is flat year over year, Reflecting average AUM levels weighed down by first quarter outflows, we entered the third quarter with discretionary AUM meaningfully higher than the level that drove second quarter billing. In fact, our discretionary AUM is now at an all-time high for the firm. Our institutional pipeline has grown substantially and remains robust, particularly in our global and international equity strategies, which continue to deliver exceptional performance. This week we received in our investing an Australian $500 million contribution, that's approximately $350 million to our global value strategy. That strategy now manages $2.5 billion. Silvercrest's institutional business now stands at $9.8 billion in AUM, up from $8.7 billion at the end of the first quarter. Our OCIO business, which the firm built from inception, now manages $2.9 billion. We've made significant progress on our global infrastructure and distribution build-out and are entering the revenue phase. We expect to complete our MIFID license through the Central Bank of Ireland by the end of the third quarter. With our Australian unit trust established, our usage vehicle and European licensing near completion and the administrative and legal costs associated with these initiatives will decline meaningfully as the distribution access they create begins to contribute. We've now achieved important third-party ratings for our strategies and vehicles, and we are working on additional ratings with major global consultants, which we expect to further open institutional distribution channels worldwide. We continue to invest in the firm's talent. Our Dublin head of office and our first Dublin-based portfolio manager join the firm next week, and we look forward to making announcements about these impressive professionals. As previously discussed, Silvercrest will continue to adjust our compensation ratio to match compelling opportunities to organically grow the business. Total compensation and benefits expense is $20.5 million, representing 66.6% of revenue for the three months ended June 30, 2026. As we have consistently communicated, our earnings and adjusted EBITDA reflect deliberate cost of significant investment program in the firm's history. and we expect the compensation ratio to remain elevated as these investments mature. As previously announced, our shareholders approved an increase in the number of shares issuable under our equity incentive plan. Intellectual capital is Silvercraft's most important resource and we intend to imminently make equity grants to the professionals who are building our business and executing our strategy. Attracting and motivating our professionals and working to align their long-term interests with those of our shareholders is fundamental to how we intend to grow the firm and Compound Value through this investment cycle and beyond. Look forward to taking your questions later in the call. Scott Gerard, our CFO, will now review the financials. Great.

Thank you, Rick. And as disclosed, our discretionary AUM as of June 30th of this year was $24.7 billion and total AUM as of the same period was $37 billion. Revenue for the quarter was $30.8 million, and reported consolidated net income for the quarter was $0.5 million. Revenue for the quarter increased year-over-year by $0.1 million, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the quarter increased year-over-year by $3.2 million, or 12%, primarily driven by increased compensation and benefits expense, and General and Administrative Expenses. Compensation and benefits expense for the quarter increased year over year by 1.7 million or 8.9% primarily due to increases in salaries and benefits expense primarily as a result of merit-based increases and new hires, including new staff in Ireland, an increase in the accrual for bonuses and increased equity-based compensation expense. General and administrative expenses increased by $1.5 million, or approximately 19.3%, primarily due to increases in professional fees, travel and entertainment expenses, especially related to our global initiatives, and portfolio and systems expense. Reported net income attributable to Silvercrest or to Class A shareholders for the second quarter was approximately $0.2 million, for $0.02 per basic and diluted Class A share. Adjusted EBITDA, which we define as EBITDA without giving effect to equity-based compensation expense and non-core and non-recurring items, was approximately $3.4 million or 11.2% of revenue for the quarter. Adjusted net income, which we define as net income without giving effect to non-core and non-recurring items and income tax expense assuming a corporate rate, of 26% was approximately $1.2 million for the quarter or $0.10 per adjusted basic and diluted EPS. Adjusted earnings per share is equal to adjusted net income divided by the actual Class A and Class B shares outstanding as of the end of the reporting period for basic adjusted EPS. And to the extent diluted, we add unvested restricted stock units and non-qualified stock options to the total shares outstanding to compute diluted adjusted EPS. Looking at the first half of the year, revenue increased year over year by $0.1 million, again, primarily driven by market appreciation and partially offset by net client outflows. Expenses for the first half increased year over year by $6.8 million, or 12.8%, primarily driven by increased compensation and benefits expense and general and administrative expenses. Compensation and benefits expense for the first half increased year over year by $3.9 million or 10.5% primarily due again to increase in salaries and benefits, primarily as a result of merit-based increases and increase in the accrual for bonuses, equity-based compensation and severance expense. General and administrative expenses increased by $2.8 million, or approximately 18.3%, primarily due to increases in professional fees, occupancy and related expenses, travel and entertainment expenses, and portfolio and systems expense. Reported net income attributable to the Class A shareholders for the first half was approximately $0.4 million, or $0.05 per basic and diluted Class A share. Adjusted EBITDA was approximately $7.2 million or 11.5% of revenue for the first half and adjusted net income was approximately $2.6 million for the first half or $0.22 per basic adjusted and diluted EPS. Looking at the balance sheet, total assets were approximately $139.9 million as of June 30th of this year compared to $166.6 million as of the end of last year. Cash and cash equivalents were approximately $20.7 million as of June 30th of this year compared to $44.1 million at the end of last year. Borrowings totaled approximately $9.5 million as of June 30th of this year. And for the same period, total Class A stockholders' equity was approximately $46 million. That concludes my remarks and we'll go into Q&A.